Steel Woes Push Weirton Into Bankruptcy

Weirton, the nation’s sixth-largest integrated steel
maker and number two tin producer, filed for Chapter 11
bankruptcy, which allows it to continue operating while it
reorganizes its operations, according to the Associated
Press.
President and CEO John Walker said the company won a
$225-million financing package from Fleet Capital Corp. of
Chicago, which will help fund reorganization
operations.

The small, employee-owned company had tried to hold
on while an import crisis in the form of steel from
overseas competitors took down dozens of competitors, but
nevertheless racked up more than $700 million in losses
over five years. Although Walker had been in the middle
of a $120-million cost-cutting plan, Weirton board of
directors nevertheless opted for the bankruptcy route
this week.

.

“In the past year, we did everything we could do
outside the bankruptcy venue before taking this necessary
step,” Walker said, according to the AP. “Our previous
initiatives strengthened the company, but it became
increasingly evident in the current industry climate that
Chapter 11 reorganization is the only remaining solution
to address our liability issues.”

Union Buys Give Backs

The Independent Steelworkers Union (ISU) had helped
Walker trim $38 million, approving a one-year contract
that cut pay 5%, canceled a planned raise, and froze
accrued pension benefits. The company planned to cut
another $34 million by asking the 3,600 active employees
and some 4,600 retirees and dependents for health care
give backs.

Retirees, however, had been slow to embrace the
request that they help cover the cost of health insurance
with a $200 monthly deduction from their pension checks.
They also faced higher co-payments for prescription drugs
and doctor visits. Weirton Steel is seeking court
approval to create a committee of retirees to address the
pension issues.Combined, the contract and health care
changes would have saved the company $72 million.

Despite its earlier financial cooperation, ISU
President Mark Glyptis said the bankruptcy filing was
unnecessary and avoidable.”Today, our senior management
effectively gave up and conceded defeat,” he said,
according to the AP. “But the working people of Weirton
Steel will never surrender. We will not give up.”

While larger steel makers like Cleveland’s LTV and
Pennsylvania’s Bethlehem Steel were eventually gobbled by
the ongoing industry consolidations, creativity and
determination kept Weirton independent. Bolstered by a
strong relationship with the ISU, it endured a series of
layoffs. It secured loans, negotiated $30 million in
savings with vendors and saved $8 million with a
machinery lease agreement.

The company and the nation’s steel industry have been
battling for survival for the past several years. The
industry has been combating what it says is unfair foreign
competition and a slow economy.
The Bush administration imposed tariffs of up to 30%
on some foreign products in March 2002, a move designed to
give US manufacturers time to recover and reorganize to
become more competitive (See
US Steel Shows Off
Restructuring Plan
).

Hard hit by having to shoulder responsibility for
the stream of steel maker pension plans from defunct or
bankrupt companies was the Pension Benefit Guaranty Corp
(PBGC), the federal private pension insurer. PBGC
officials have repeatedly indicated that the steel plans
have made an enormous dent in the agency’s finances
(See
PBGC Head Paints
Gloomy Picture for 2003 – and Beyond
).